How Amazon 'target' Tapzo could spice up its digital payments play
On a day when Paytm confirmed that billionaire Warren Buffett’s Berkshire Hathaway had invested in it and Google rebranded its local payments app and forayed into digital lending, Amazon was also in the spotlight for its digital payments play.
According to several media reports, Amazon Pay, the e-commerce giant’s payment service, has acquired personal assistant platform Tapzo in a cash and stock deal pegged in the ballpark of $30-40 million.
Amazon and Tapzo are both yet to officially confirm these reports, but should a deal go through, it would offer an insight into the Jeff Bezos-led behemoth’s strategy.
Perhaps Amazon has realised that it arrived rather late to India’s digital payments party - a sense of deja vu given that fierce rival Flipkart beat it to the punch on the fashion front.
“Amazon Pay is nothing but a payment gateway for Amazon.in,” said Satish Meena, senior forecast analyst at research firm Forrester. “They were late, entered a market that already had leaders. They have been trying to figure out workable use cases for payments.”
The digital payments battle, unlike the one Amazon first fought to command a dominant space in the country’s e-commerce sector, is against some global giants - Google (Pay); Facebook (WhatsApp’s to-be-launched payment services) Alibaba (Paytm) and Walmart (PhonePe). Credit Suisse estimates that digital payments in India will be a $1 trillion industry by 2023.
To catch up, the most obvious option for the retail giant is to find smaller players that would offer it certain specific use cases in the payments space. And to that end, Tapzo fits the bill.
After years of turmoil, experimentation and pivots, Tapzo is now an app aggregator platform that allows users to access more than 35 apps, including Amazon, Flipkart, Ola, and Uber from a single app interface.
Users can make mobile, DTH and data card recharges, bill payments, order cabs and food, book flight and bus tickets, and avail of home services, to name a few.
That’s a plethora of use cases for a payment product and Amazon appears to be alive to that fact.
Amazon could eventually merge Tapzo with the Pay app, integrate its tech team for Pay services, on-board Tapzo’s user base that is spread across various internet purchase segments on to the Prime platform; and eventually see these efforts serve the intended purpose - increase the buyer base on the larger Amazon ecosystem and augment their ability to buy more.
“The lack of time on its hand and the vast opportunity that’s it’s losing out to its rivals has sort of pushed them to grab what’s available in the market,” Meena said.
Taking one step at a time, Amazon has slowly been beefing up its customer-facing payment offerings with the latest addition being the introduction of a new bill payments facility on Tuesday with which users can now pay electricity, landline, broadband, and other utility bills.
The company also partnered recently with food delivery platform Swiggy and pizza chain Domino's as a payment option for their customers.
Towards the end of last year, Tapzo had forayed into a new segment where it made apps for financial products and services available on its platform. For this, it tied up with online financial services platform BankBazaar and online lending firm IndiaLends.
Separately, Amazon has been steadily creating an overarching financial ecosystem beyond just payments.
In April, it invested $22 million (Rs 144 crore) in digital lender Capital Float and the following month, it led a $12 million (around Rs 80 crore) investment in online insurance startup Acko General Insurance Co. Ltd.
Amazon has also invested in online financial services marketplace BankBazaar.
The firm has also been injecting its local digital payments arm with fresh capital. Amazon Pay received a fresh funding infusion of Rs 230 crore last month. This marked the third such infusion after Amazon Pay increased its authorised share capital by five times to Rs 2,000 crore last October. It had received Rs 195 crore in March this year and Rs 260 crore in October 2017.
The latest infusion valued Amazon Pay India at around Rs 1,067 crore ($156 million).
Tapzo’s roller coaster ride
Even as Amazon looks to take the fight to its rivals, Tapzo has had its own battles over the years.
Tapzo was founded in 2010 by Ankur Singla, and later, Vishal Pal Chaudhary, the chief technology officer, and Avinash Vankadaru, who is part of operations, joined the startup.
Tapzo, which has undergone multiple pivots and rebranding exercises, initially started off as Akosha.com, an online customer feedback platform.
In 2015, it rebranded itself as Helpchat, a chat-based personal assistant.
Subsequently, in November 2016, it underwent one more pivot and rebranded as Tapzo.
After the most recent pivot, Tapzo raised about $1.93 million (Rs 12.32 crore) from existing investors in January this year.
The latest fund infusion came at a significantly lower valuation. According to a person familiar with the development who spoke to VCCircle at the time on condition of anonymity, Tapzo’s pre-money valuation in the latest round may have come down by as much as 45% in comparison with its last round.
In September 2016, VCCircle had reported that Tapzo secured a Series C round led by American Express Ventures, the venture investment arm of American Express Co and existing investor Sequoia Capital India. Southeast Asia-focused fund East Ventures had also participated in the round.
According to details available with VCCEdge, the data and financial research platform of News Corp VCCircle, the company had raised $10.49 million in the Series C round.
A 2016 report by online media publication The Ken stated that Tapzo commanded a post-money valuation of about Rs 600 crore after that investment
While Sequoia Capital is the single-largest investor in Tapzo, the company is also backed by media conglomerates HT Media and Bennett, Coleman & Co Ltd.
In 2015, Sequoia Capital India had led a $16-million Series B round in the company. It was known as Akosha then.
Owned and operated by Bangalore-based Coraza Technologies Pvt. Ltd, the firm registered a 60% rise in operational revenue at Rs 14.10 crore for the financial year 2016-17, up from Rs 4.44 crore in the previous financial year, filings with the Registrar of Companies show.
Gross expenditures rose to Rs 113.43 crore, up from Rs 84.83 crore, primarily on the back of a three-fold rise in marketing expenses at Rs 36.93 crore, from Rs 12.28 crore in the previous year. Consequently, net losses also widened to Rs 99.32 crore, from Rs 77.37 crore in the previous year, the filings stated.